Volkswagen's Ethics Scandal: Impact on Sales, Health, Industry

This report provides a comprehensive analysis of the Volkswagen emissions scandal, focusing on its ethical implications and its impact on various aspects of the business. The study begins with an executive summary and introduction, outlining the core issues of the scandal, which involved the use of defeat devices in the company's vehicles to manipulate emission test results. The analysis section delves into four key areas: the impact on Volkswagen's sales and revenue, the health consequences for customers due to increased toxic emissions, the reduction in management bonuses as a response to the scandal, and the broader effects on the global car industry. The report highlights the significant drop in sales, the ethical violations related to customer health, and the industry-wide repercussions, including a decline in consumer trust and stricter regulations. The conclusion summarizes the key findings, emphasizing the importance of ethical practices and the severe damage caused by the scandal. The recommendations propose strategies for Volkswagen to restore its reputation, including potential rebranding and the use of bonds to rebuild consumer trust. The report underscores the importance of ethical business practices and their impact on corporate image, customer loyalty, and long-term sustainability.

ACADEMIC AND
PROFESSIONAL
SKILLS

Table of Contents
EXECUTIVE SUMMARY.............................................................................................................3
INTRODUCTION...........................................................................................................................3
ANALYSIS......................................................................................................................................4
CONCLUSION................................................................................................................................7
RECOMMENDATIONS.................................................................................................................7
REFERENCES ...............................................................................................................................8

EXECUTIVE SUMMARY
Ethics can be elaborated as moral standard by which people judge the behaviours of
others. It involves employment and analysis of different concepts such as right and wrong. Under
this report the case study undertaken is Volkswagen's case study in this the organisation used
fitted defeat devices in their vehicle so that their vehicle can pass diesel emission test. The report
will be studied under under four different sections. First section will be highlighting the effect of
organisation's scandal on their sales and revenue. Second section will talk about cost which is
being incurred by business in order to provide better health opportunity to customers who have
been affected by the organisation's wrong conduct. The third section will deal with the effect of
the scandal on the bonus of management of the company. The fourth section will highlight the
impact that it has on the industry. In order to reduce their operation's impact and enhance their
mage in the market it is suggested that the firm restart their activities under different name or
they can also take help of bond.
INTRODUCTION
Ethics can be expressed as moral principle that are responsible fro governing a person's
behaviour that is associated with what is right and what is wrong. Whereas business ethics can
be expressed as form of applied ethics that are responsible for examining ethical principles or
ethical problems that exist in the business environment. If a business wants to exists in the
market for a longer period then it is essential for the business to accept and adopt theses ethical
practices in their business environment so that they can work in such a way in the market that
their action doses not harm human or environment. The practices related with environment
conservation and sustainability have gained more importance in the recent times (Schiermeier,
2015)
The organisation undertaken under this report is Volkswagen a German multinational
automotive business organisation. The report will examine different practices that have been
adopted by businesses in their production process. The business have used defeat devices or
software in the production of their vehicle engines so that they can increase the vehicle
performance along with maintaining the vehicle emission within regulatory standards (Siano and
et. al., 2017).

An organisation's reputation in the business environment is essential for growth and
sustainability of the business. The business bottom line get directly effected by the the amount of
trust and confidence of customer which they have received as an result of the business
reputation. Under this report the impact of the organisation decision of using defeat devices will
be analysed in relation with their corporate image and their position in the market.
A same case happened in Toyota company they did not provide information related to use
of faulty pedals of their vehicle and they tried to put all the blame on the engineers and software
developers even Volkswagen tried to do the same (How VW tried to cover up the emissions
scandal 2018).These incident have a large impact on business reputation in order to strengthen
the position of business they tent to have a good corporate image that will help them to gain trust
of people and also in motivating people to buy their products. The report will examine the impact
of the Volkswagen scandal on the car industry.
ANALYSIS
The Volkswagen cheating scandal have effected the business reputation and working
across the globe which can be elaborate in the following points.
“Volkswagen Defeat Devices impacted on the company sales and revenue”
According to Roger Parloff, the entire scandal have impacted the business to large extent
and it has especially impacted the the car model Skoda and Audi. The cheating scandal have an
great impact on the sales of the business and have reduced the sales of the business. It has
impacted not only the brand that are under the group but also have impacted the parent business
functioning and business. The sales of the business reduced which have not happened in their
history. The revenue of the business reduced which have not happened in the pat 11 years that
happened because of the cheating scandal (Mansouri, 2016)
The drop in the revenue generation of the business can be analysed with the drop in the
demand for their products in the countries such as China and US. The demand for the
organisation's products reduced there on a large extent. In the month of December because of the
decrease demands the organisation faced Hugh losses. In order to handle the situation the
business made an announcement that they would enable measures that will be focused on fixing
the damages that have been cause to both human life and environment which is because of
inclusion defect devices that were used by business in order to pass the emission lab test. The
business have seen first drop in the past 13 years in their deliveries which happened because of

the decrease in the business sales and revenue. Due to the entire cheating scandal the sales of the
organisation reduced thus, decreased the profitability of business.
The business involved unethical practices in their operation which comprises of equip
ting their vehicle with defeat device which have directly effected and hampered the customers
loyalty and belongingness which they had for the business. The cheating scandal costed business
in terms of customers loss as the customers tent to choose alternative brand options in the market
which were the business competitors. After the scandal the organisation had to pay large sum of
money in the from of compensation in order to reduce the impact of the same on business
reputation (How VW Paid $25 Billion for 'Dieselgate', 2018).
“Volkswagen emissions played with the health of their customers”
According to Noelle Eckley Selin, the company adopted defect device in their vehicle
which resulted in release of toxic pollution which caused around 60 premature deaths and it also
resulted in a major threat to the security and safety of the their customers who are travelling in
their vehicle that comprise of defat device. In the subsequent years different cars that were
produced by Volkswagen possessed threat to the life of individuals as they tend to release a large
amount of nitrogen oxide in the environment. So it can be analysed that the organisation is not
adhering to laws and standards that have been formulated by Clean Air act that are related with
emission limits in vehicle. It is the duty of the of the organisation to follow the law and work as
per the set standards. They adopted non ethical activities in their business which involved using
nitrogen oxide which is key element component in smog. As the smog can cause respiratory
diseases and it can also cause danger to human life. It is responsible fro premature deaths of
individuals and it have also been noticed that exposure of harmful particle in nature can cause air
pollution.
The pollution that was released by vehicle that contained defect device also resulted in
chronic bronchitis of type thirty one and thirty four. The United State had to invest large sum of
money in order to deals with the individuals sickness. The business had to recall their cars from
the market as they resulted in more premature death and several other issues. (Volkswagen
emissions cheating caused $100 million in health costs, according to analysis, 2015). With it due
to release of nitrogen oxide in the environment by the vehicle engine it resulted in detrimental
phenomenon acid rain. The scandal impacted both human life and environment to a great extent

and it impacted the sales of the business across the globe. Which resulted in decreasing the
profitability and reputation of the company.
“Cheating scandal resulted in cut of Managers Bonus”
According to Geir Moulson, when the public got news about the unethical practice of
Volkswagen which involved adopting defect device in their vehicle their sale got effected on a
large extent. In order to handle the losses the business decided to cut the bonus of their chief
management individuals. That depicted that the business will no longer be providing fair
remuneration to their employees for their performances. With it the business announced an
Statement that emphasised on reducing adherence to all the models that were reaching fro fir
remuneration for the staff members. Which means they are considering on adoption of approach
that can be approached to all the parties that are involves in several processes and activities of
the organisation. The business applied reduction to the management board and to the members
that were responsible to carry the day to day activities of the business. The reduction will impact
the reputation of the organisation in loner term as it will develop feeling among the management
term that they are not being paid on a fair basis (Volkswagen says its managers' bonuses will be
cut following the automaker's diesel emissions scandal 2018).
“ Emission scandal impact on global industry”
According to Raymond Michaels, the cheating scandal of the Volkswagen affected the
German car industry it have sent a shock wave across the global car industry. The shares of the
renualt, Nissan and BMW dropped by 2-4 percent which depicted the seriousness of the car
market situation. Many analysis have posit that the fallout from the Volkswagen scandal will
cause long term consequence in the car industry. It will not only result in fall in consumer
demand but will also result in tough environment regulations, driving the prices upwards and
shrink in the profits across the boards. A researcher believed that this scandal will result in fall in
diesel car market share in the European market and it will also result in halt in the United State
regulation which will result in more strict laws related to permit and they will implement much
more tougher real world tests that will be more expensive and tough for the car manufacturers to
meet. It have impacted the entire car industry by adoption of defect device in their vehicle in
order to pass the emission test. Which have hampered the reputation of the car industry across
the globe and have impacted the functioning of the same (VW EMISSION SCANDAL AND THE
GLOBAL CAR INDUSTRY 2015).

CONCLUSION
From the above report it can be concluded that Volkswagen's adoption of defeat devices
in their vehicle in order to pass the emission test have impacted the reputation of the organisation
to great extent as they have operated unethical practices in their business model. The scandal
resulted in the decrease in the revenue of the business and it have also effected the health of the
customers and environment. The entire scandal resulted in decreasing the sales of the business
which happened for the first time in last 11 years. In order to handle the situation the company
reduced the bonus amount of their management. The report will also analyse the impact of
scandal on the industry.
RECOMMENDATIONS
The entire cheating scandal have impacted on the organisation image. Which happened
because of the corporate culture of the organisation. It is important for businesses to establish
different ethical programme in their operations that can guide and tell their employees the
difference between what is right and wrong. In order to deal with the reputation loss the business
can use two methods firstly they can change the name of the business ans secondly they set a
bond. The company can take use of various method or ways in order to improve their reputation
in the market again. The business enjoyed high stake in the market as it is been in the market fro
a longer period of time but the scandal ruined the hard earned reputation of the business.
Therefore the organisation can use different name in order to carry their business operation in
the market. It will also help the business to change the brand image of their organisation in the
minds of customers.
In order to to regain the trust of the individuals the business can also join hands with
agencies that will be assisting them in testing process of emission of their vehicle along with
their own internal team. It will help the business to gain the people trust back and will also help
them in increasing their market image. Business can also look at the option of bond which will
help them to make people believe and provide guarantee that the same issue will not happen in
the near future. It will also help the business to gain people trust. In order to provide bond in the
market the business needs to make large investment in terms of finance in order to assure people
that business is truly apologetic about their earlier decision and will not repeat it in the future. In
order to finance the bond the business can sell any of it's brand.

REFERENCES
Books and journal
Siano and et. al., 2017. “More than words”: Expanding the taxonomy of greenwashing after the
Volkswagen scandal. Journal of Business Research.71. pp.27-37.
Schiermeier, Q., 2015. The science behind the Volkswagen emissions scandal. Nature News.
Rhodes, C., 2016. Democratic business ethics: Volkswagen’s emissions scandal and the
disruption of corporate sovereignty. Organization Studies.37(10). pp.1501-1518.
Clemente, M. and Gabbioneta, C., 2017. How does the media frame corporate scandals? The
case of German newspapers and the Volkswagen diesel scandal. Journal of
Management Inquiry.26(3). pp.287-302.
Mansouri, N., 2016. A case study of Volkswagen unethical practice in diesel emission test.
International Journal of Science and Engineering Applications.5(4). pp.211-216.
Online-
VW EMISSION SCANDAL AND THE GLOBAL CAR INDUSTRY . 2015. [Online]. Available
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Volkswagen emissions cheating caused $100 million in health costs, according to analysis.
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How VW Paid $25 Billion for 'Dieselgate'. 2018. [Online]. Available Through:
<http://fortune.com/2018/02/06/volkswagen-vw-emissions-scandal-penalties/>.
How VW tried to cover up the emissions scandal. 2018. [Online]. Available Through:
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